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North America to Achieve 'Energy Independence' by 2030?

BP thinks so in its World Energy Outlook report. Others, such as Ernst and Young, challenge the assertion. One conclusion both make: Economic and regulatory conditions in North America make it the hotspot for exploiting tight oil and gas.

In the BP Energy Outlook 2030 document released on January 16, BP Group Chief Economist Christof Ruehl states, “The Outlook describes a future that is different in several respects from what many expected just a short while ago. We still expect global energy demand to grow—by 36% between 2011 and 2030—driven by the emerging economies.” He went on to say, however, that he expects energy efficiency efforts to continue even while supply patterns are shifting. “The Outlook demonstrates how unconventional oil and gas are playing a major role in meeting global demand. Over the period to 2030, the US becomes nearly self-sufficient in energy, while China and India become increasingly import-dependent.”

Ruehl emphasizes that both energy resources in the ground and factors above the ground—especially competition in a market that allows free entry—are both necessary to increase supply. He believes that production increases in natural gas and oil is likely to remain only in North America because of these ‘above ground’ free-market conditions. “High prices are also supporting the expansion of supply.” (Source: BP Energy Outlook 2030)

Ernst & Young agrees that US oil output will continue to rise, but becoming the world's top producer is an uphill battle. In a press release dated Jan. 28, the company made some other predictions.

According to Ernst & Young, “…The rise in domestic oil output and the expectation that US oil development will continue to grow amid high oil prices prompted some market observers to predict the US could become the world's largest oil producer, upstaging Saudi Arabia, by 2020.

But while US oil output growth is expected to continue to be strong, it's going to be hard to rival Saudi Arabia. US oil production comes at an extremely high cost. Some anticipated increases in domestic oil production may not materialize if crude prices decline below $80 a barrel.”

“Whether the US will become the world's top producer is not the most important thing to focus on,” said Marcela Donadio, Americas Oil and Gas Leader for the global Ernst & Young organization. “What matters is the dramatic reversal of the US energy fortunes and the need for the US to take significant steps to ensure oil supply growth continues. Coherent energy policy, access to resources, improved infrastructure and economic stability are all key to future success.”

The company also notes that 2012 was not a bad year for oilfield services companies as rig counts held up and global upstream spending cautiously increased. “The US rig count was slightly off as gas-directed drilling slowed and was not fully offset by new oil and liquids-directed drilling. Oilfield service cost pressures slowed somewhat due to efficiency gains, while labor pressures rose. Offshore, there still are a large number of new-builds coming into the market that are expected to keep a lid on day rates, utilization and profit margins.”